Industry Reports

Deutsche Bank Reports Summaries

080317 Deutsche Bank Report - February Containerboard Monitor

Deutsche Bank - Equity Research

* February shipments: sluggish demand

Feb. containerboard & box numbers show that domestic box volumes remain sluggish. Inventories rose slightly, and operating rates fell slightly. While we are growing cautious about the price hike initiative, we remain positive on the containerboard stocks.

* Adjusted box volumes decrease

Volumes rose 1.1% y/y in Feb., but adj. for the extra shipping day, they fell 3.7% y/y on an avg. week basis. Many observers tend to focus on the avg. week, but we think that the "real" number is a blend of the two, or a decline of about 1.3% y/y. The decline is disappointing given an easy Feb. 2007 comp.

* Inventory change a modest disappointment

Combined mill and box plant inventories rose 29K tons m/m. Looking at the last 10 yrs, inventories typically fall by an avg. of 23K tons, suggesting a neg. variance in Feb. of 52K tons. At 2.48MM tons, inventories still remain relatively lean, but are up substantially from the recent low of 2.19MM tons reached last Oct.

* Operating Rates & Trade Flows

Op. rates declined from 98.3% in Jan. to 97.1% in Feb. While the Feb. rate is still high, the last few months have seen a noticeable drop from the extremely high levels of last summer. Exports rose 6.5K tons, but imports rose 5.3K tons.

* Prices

All major producers are behind a $50/ton price hike for March. Some observers were already dubious about this price initiative due to the sluggish demand and the weakening economy. These numbers will not help.